- 12 Marks
AAA – Nov 2017 – L3 – Q5a – Practice Management, Professional Responsibility and Liability
Identify the causes of failure in a microfinance company and recommend actions to prevent recurrence.
Question
You are an Audit Manager in the firm Taiplan Chartered Accountants, a firm in public practice registered with the Institute of Chartered Accountants (Ghana) (ICAG). Bank of Ghana (BOG) has appointed your firm to investigate reasons for the failure of DC Microfinance Limited (DCM) and your investigation has revealed the following as some of the reasons for the failure:
i) The board of directors of the company is made up only of Mr. and Mrs. David Commodore;
ii) The failure of the Bank of Ghana to examine or detect the non-submission of the fidelity returns submitted to it by the company and monitor the company adequately;
iii) The auditors have been the auditors of the company since its incorporation over ten years ago;
iv) The failure of the auditors of the company to spot and question some dubious accounting treatments adopted by the company. This is partly due to the fact that the consulting arm of the audit firm has been performing all the consultancy work needed by the company since its incorporation and particularly at the time of its application for the microfinance operating permit from BOG.
Required:
For points (i) to (iv) above, state for each point, and show what would contribute to the failure of the company and make ONE recommendation to ensure that this would not re-occur in DCM or any other microfinance company in Ghana. (12 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Auditor Independence, Bank of Ghana, Corporate Governance, Microfinance
- Level: Level 3
- Topic: Practice management, Professional responsibility and liability
- Series: NOV 2017